Facing the senior years can be scary when you think about your health deteriorating. You wonder who will take care of you or if you will always be able to live at home. The reality is that people are living longer these days and are more likely to need a home health care worker or long term care facility in their later years. According to MarketWatch, Americans who were 65 in 2018 are expected to live another 19 years and six months, on average.

Many of us will look to Medicaid as a way to pay for long term care or homecare resources we may need. No matter what kind of care we choose, the process of growing old can be expensive and last longer than we have planned for. 

The Medicaid 5 year look back is one of many policies that the state government uses to determine if you qualify for Medicaid care. Keep reading to learn more about the 5 year lookback and how to qualify for Medicaid while maximizing your retirement funds during the later years of life.

How Do I Qualify for Medicaid Coverage?

To qualify for Medicaid in NC, if you are 65 or older, blind, or disabled, you must have income below $1,064/month for a household of one or $1,437/month for a household of two. You also must not have assets in real property more than $2000 for 1 person or $3000 for 2 people.

According to an income qualifying chart at NC Medicaid Planning Assistance from the American Council on Aging, any income that a Medicaid applicant receives from any source including employment, alimony, pension, Social Security Disability Income, Social Security Income, IRA withdrawals, and stock dividends is counted.

There are other situations where you may qualify for help. If you have medical bills you cannot pay, there is a six-month period for you to meet your Medicaid deductible and qualify for aid. However, without an estate plan, you may be left spending down your retirement savings in order to qualify for Medicaid.

5 Year Lookback

Needing coverage for basic healthcare needs, many seniors spend down their assets to qualify for Medicaid. You may think that giving gifts of money or assets to family is a good idea to reduce assets. However, if you want Medicaid coverage, it is NOT a good idea to give monetary gifts or assets during the 5 years before you apply. 

If you give a granddaughter $5000 to reduce your savings in order to qualify for Medicaid, the 5 year look back policy will hold that against you. Any time you actively give away assets without charging fair market value during the 5 years before trying to qualify for Medicaid coverage, you are in violation of the Medicaid 5 year look back policy. If you are found to be in violation of the look-back period, you will face a time of Medicaid ineligibility.

Even though there are laws in the US that allow an individual to gift up to $15,000 to a person every year without tax consequences, these gifts can still make you ineligible for Medicaid. The 5 years before you apply for Medicaid are crucial to whether you qualify.

What if I Don’t Plan to Use Medicaid?

A single stay room at a long-term care facility can cost upwards of $8000 every month. Staying home and hiring a home care worker could cost even more with the equipment and other medical service costs added on. Using all of your savings to pay for your care is not ideal. 

By planning ahead, you can use Medicaid to cover most of these costs and still have an income to help pay for other items you may need. However, if you don’t plan ahead, you may end up spending your retirement and savings on your care and then be left with no assets at all.

By the time you have spent enough of your money to qualify for Medicaid, you are down to just the bare minimum needed to exist.

Leave an Inheritance

If you have worked hard and saved money in retirement plans or other types of investments and savings for the later years of your life, you may hope to leave an inheritance to your children or grandchildren someday. The time to start planning for this is now. 

It is possible to qualify for Medicaid and still preserve assets to have resources for yourself and your heirs as you need them. It is also possible to qualify for Medicaid and still have assets to pass on as an inheritance. To do this, you must understand and use the laws in NC to your advantage. 

Make an Estate Plan

Start planning early and reap the most benefits. If you create an irrevocable trust at least 5 years before you need Medicaid coverage, you can qualify for Medicaid because you do not own the assets in the trust or have any claim on them once you pass away. With a trust, you can name a Trustee to pay out funds to you as needed according to the terms of the trust. You can place real property and other assets into this legal framework knowing that you have the extra income you may need while taking advantage of Medicaid benefits.

It is also possible to leave an inheritance after you die since the trust is dispensed to the beneficiaries in the amounts and times that you specify after you pass away.

Start Planning Now

Whether long term care or high medical bills are in your future or not, the time to start planning is now. The earlier you make a plan, the better your chances of keeping your standard of living when or if you need long term care or expensive medical intervention. Thinking ahead saves you from trying to “spend down” your retirement savings, gives you peace of mind, and can even help you prepare to leave an inheritance. 

Seek Help

If you have any questions about how to plan for your senior years, talk to a knowledgeable elder law attorney who specializes in maximizing your financial setup and preparing you and your loved ones with a clear direction for your future healthcare needs and financial stability.

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